September 2017

1 September 2017 Page 1. Limitation clauses Unclear limitation clauses – Royal Devon and Exeter NHS Foundation Trust v ATOS IT Services UK Ltd [2017] EWHC 2197 (TCC) 3 2. Contractual discretion Rationality in exercise of discretion – Watson and others v Watchfinder.co.uk Limited [2017] EWHC 1275 5 3. Exclusion clauses Excluding liability for negligence was reasonable – Goodlife Foods Ltd v Hall Fire Protection Ltd [2017] EWHC 767 (TCC) 7 4. UCTA African Export-Import Bank v Shebah Exploration & Production Company Ltd 9 5. Contractual interpretation Interpretation of uncertain provisions – Kitcatt and others MMS v UK Holdings Ltd and others [2017] EWHC 675 11 Supreme Court decision on conflicting contractual standards – MT Højgaard A/S v E.On Climate and Renewables UK Robin Rigg East Ltd [2017] UKSC 59 13 GB Building Solutions Ltd (in administration) v SFS Fire Services Ltd (t/a Central Fire Protection) 2017 EWHC 1289 15 6. Assignment Effective assignment and notice – General Nutrition Investment Company v Holland and Barrett International Ltd and another [2017] EWHC 746 (Ch) 17 7. Service provider liability EU proposal provides clarity on incoming requirements for digital service providers 19 The purpose of these snapshots is to provide general information and current awareness about the relevant topics and they do not constitute legal advice. If you have any questions or need specific advice, please consult one of the lawyers referred to in the contacts section. 2 8. Terms and conditions Thousands agree to clean loos and hug stray cats for free WiFi 21 9. Data protection Government publishes the Data Protection Bill 23 Data Protection Working Party adopts Opinion 2/2017 on data processing at work 25 ICO publishes updated Subject Access Code of Practice 27 ICO fines Boomerang Video Ltd for failure to prevent cyber attack 29 ICO issues fines for emails asking customers to change marketing preferences 31 10. ASA New BCAP guidance on advertising of high fat, salt and sugar (HFSS) products 33 ASA Ruling on John Lewis Partnership plc t/a John Lewis – misleading pricing of products advertised as free in bundle promotions 36 Inspop.com Ltd t/a Confused.com (5 July 2017) – ASA decision on “No.1 claims” 38 ASA publishes report on gender stereotyping in advertising 41 ASA Ruling on SKY UK Ltd t/a Sky – “Super Reliable” broadband 43 ASA Ruling on British Telecommunications plc t/a BT – prominence of qualifications to headline claims 45 ADVISORY | DISPUTES | TRANSACTIONS 3 Limitation clauses Unclear limitation clauses – Royal Devon and Exeter NHS Foundation Trust v ATOS IT Services UK Ltd [2017] EWHC 2197 (TCC) The question Will an ambiguous limitation of liability clause be valid and enforceable? The facts Royal Devon and Exeter NHS Foundation Trust (the Trust) entered into a contract for the provision of a computer system by ATOS IT Services UK Ltd (Atos). However, the Trust claimed that there were defects in the system provided, and that Atos had failed to remedy them, and proceeded to terminate the contract. The Trust claimed damages and argued that the limitation of liability provisions were unenforceable as they were ambiguous and uncertain. Atos' aggregate liability was stated not to exceed: “for claims arising after the first 12 months of the Contract, the total Contract Charges paid in the 12 months prior to the date of that claim.” The Trust argued that this made it unclear whether there was a single limitation cap or a separate cap for each claim. Atos argued the reference to “claims” should be read as “claim”. The decision The Court rejected the Trust's argument that the provision was incapable of being construed and therefore unenforceable. The Court applied usual contractual interpretation principles (Arnold v Britton, Rainy Sky and Wood v Capita). The Court must ascertain the objective intentions of the parties by reference to what a reasonable person, having the background knowledge, would have understood the agreement to mean in the relevant factual and commercial context. There were two competing interpretations and so it was open to the Court to prefer the option that made commercial sense, this case that the parties had intended an aggregate cap on liability. The Court also noted it will try and give effect to terms agreed by parties where possible, and will be reluctant to decide a contractual provision is void for uncertainty (Whitecap Leisure v Rundle [2008] EWCA Civ 429). 4 Why is this important? This decision again highlights the importance of precise drafting, particularly limitation clauses. It is also a good example of contractual interpretation where the Court prefers the interpretation that makes commercial sense (ie a Rainy Sky approach). Any practical tips? Be careful with your drafting! Take particular care with layered limitation clauses. Continue to bear in mind that recitals and acknowledgements within an agreement may assist the Court with identifying the commercial context. ADVISORY | DISPUTES | TRANSACTIONS 5 Contractual discretion Rationality in exercise of discretion – Watson and others v Watchfinder.co.uk Limited [2017] EWHC 1275 The question What limits apply when an option is subject to the board's consent? The facts Watchfinder (WF) entered into a services agreement with another Adoreum Partners (AP) and granted options over its own shares to three of AP's directors. The option agreement provided: “The option may only be exercised with the consent of a majority of the board of directors of the Company.” When the directors attempted to exercise their share options, WF refused to issue the shares, on the basis that its board of directors did not consent. The directors claimed for specific performance. WF argued that the option gave the board an unconditional right to reject any exercise of the share options. The decision The Court held that the clause in the option agreement could not be interpreted as an unconditional right to reject any exercise of the options. Otherwise the options, which were part of the overall deal, would be worthless – this was against commercial common sense. The provision could not be disregarded entirely and, although unusual, it must have been intended to impose some form of restriction on the options. The Court held that, as a matter of construction or implication, the board had a duty to exercise its discretion over the option in a way which was not arbitrary, capricious or irrational in the public law sense (see Braganza v BP Shipping [2015] 1 WLR 1661). This must involve a proper process, taking into account the relevant matters and not irrelevant matters, and without reaching a decision no reasonable board could have reached. In this instance, there had been no proper exercise of discretion. There had been barely any considered exercise of discretion – there were no discussions, relevant matters had not been considered, the board wrongly thought it had an absolute veto, and the decision was arbitrary. 6 Why is this important? This case shows the reluctance of the Court to allow an absolute discretion, particularly where this would result in an uncommercial outcome, as well as the importance the Court places on proper process and how any contractual discretion is exercised. Any practical tips? Clearly identify provisions in an agreement where discretion may be exercised (e.g. discretion, election, consent, etc.) and state whether this will be sole/absolute, reasonable, etc. Even “absolute” contractual discretion is subject to proper process (considering relevant matters and disregarding irrelevant matters) and must not be not arbitrary, capricious or irrational. Consider stating what process will be followed and what matters will be taken into account. At the point discretion is being exercised, ensure the decision makers know what they must do, that contractual/proper processes are followed and record a (rational or reasonable!) basis for the decision. ADVISORY | DISPUTES | TRANSACTIONS 7 Exclusion clauses Excluding liability for negligence was reasonable – Goodlife Foods Ltd v Hall Fire Protection Ltd [2017] EWHC 767 (TCC) The question Can a widely-drawn exclusion of liability which excludes liability for all negligence be reasonable under the Unfair Contract Terms Act 1977 (UCTA)? The facts Goodlife contracted with Hall Fire to design, supply, install and commission a fire detection and suppression system at Goodlife's frozen food production factory. A fire broke out at the factory, which Goodlife claimed led to £6 million of property damage and business interruption losses. Goodlife claimed that Hall Fire was liable for the losses caused by the fire, as it happened as a result of a failure or malfunction in the fire suppression system. The claim was in negligence rather than breach of contract for limitation reasons. Hall Fire sought to rely on the exclusion clause contained in clause 11 of their standard terms and conditions, which stated that: “We exclude all liability, loss, damage or expense consequential or otherwise caused to your property, goods, persons or the like, directly or indirectly resulting from our negligence or delay or failure or malfunction of the systems or components provided by us for whatever reason “. Goodlife challenged the incorporation and enforceability of clause 11. The decision The Court decided that: the clause was not particularly unusual or onerous, but in any event it had been sufficiently drawn to Goodlife's attention. Goodlife had the opportunity to read the terms and conditions and it has access to appropriate advice the court agreed with Goodlife that the exclusion did purport to exclude liability for personal injury or death (which is not permitted under section 2(1) UCTA). The question was then whether this rendered the whole exclusion clause unreasonable and of no effect Goodlife tried to rely on the Court of Appeal decision in Stewart Gill v Horatio Myer [1992] EWCA 6 as authority that severance of the offending part of the clause was not 8 permissible.

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